EASTERN ASSURANCE & SURETY CORPORATION, PETITIONER, VS. HON. EMETERIO C. CUI (IN HIS OFFICIAL CAPACITY AS JUDGE, COURT OF FIRST INSTANCE OF MANILA, BRANCH XXV) AND LORETA B. PAN…

This is a petition to review on certiorari the order,
dated October 30, 1978, of
the respondent judge in Civil Case No. 115385, Court of First Instance of
Manila.

The facts of the case, briefly, are the following:

On April 21, 1977,
Transunion Corporation and Rey
M. Pan doing business under the name of Pan Phil Trading entered into a
dealership agreement for the sale of merchandise.  Pursuant thereto Pan Phil Trading had to file
a P20,000 surety bond and it complied by presenting a surety bond of Eastern
Assurance & Surety Corporation.

On May 15, 1978,
Transunion filed a complaint (Civil Case No. 115385,
CFI, Manila) against Rey M. Pan, Pan Phil Trading and Eastern Assurance &
Surety Corporation for the full payment of merchandise delivered in the amount
of P10,841.54.

After Eastern Assurance & Surety Corporation had filed its
Answer with Crossclaim, it filed a motion to file a
third-party complaint against Loreta B. Pan, wife of Rey M. Pan.  The
reason given in the motion is that movant has a legal
right against Loreta B. Pan.  It appears that in consideration of the
surety bond, the Pan spouses executed an Indemnity Agreement in favor of
Eastern Assurance & Surety Corporation.

On July 24, 1978,
the respondent judge granted the motion and admitted the third-party complaint.

Subsequently, Loreta B. Pan filed a
motion to dismiss the third-party complaint on the ground that venue was
improperly laid.  She invoked paragraph 7
of the Indemnity Agreement which reads:

“7.  WAIVER OF VENUE OF ACTION:  – We [meaning Rey
M. Pan and Loreta B. Pan] hereby agree that any
question which may arise between the Company and the undersigned by reason of
this document and which has to be submitted to the court of justice, shall be
brought before the court of competent jurisdiction of Quezon
City, waiving for this purpose any other proper venue.”

Notwithstanding the opposition of Eastern Assurance & Surety
Corporation, the respondent judge in his order dated October 30, 1978, peremptorily dismissed the third-party complaint on the ground that the
motion to dismiss was “well-taken.” The respondent judge, may his
tribe vanish, did not elaborate.  A
motion to reconsider the order of dismissal was denied in a similar fashion.

We have to grant the petition despite the comment of the
respondent judge to the petition for review that in dismissing the third-party
complaint he had to uphold the policy of upholding the sanctity of contracts in
preference to the policy against multiplicity of suits.  He even cites Roscoe Pound’s Scope and
Purpose of Sociological Jurisprudence in 24 Harvard Law Review 607.

What the respondent judge and even petitioner’s counsel failed to
perceive is that paragraph 7 of the Indemnity Agreement was imposed on the Pan
spouses by the petitioner surety company for its benefit and convenience and
therefore the latter could waive the provision by filing its complaint, not in Quezon City, but in Manila. 
There is, therefore, no sanctity of contract to uphold.

But even if we assume that paragraph 7 of the Indemnity Agreement
created a reciprocal obligation, it does not necessarily follow that it is
applicable to the present situation.

It has to be remembered that a third-party complaint is but
ancillary to the main action and is a procedural device to avoid multiplicity
of suits.  Because of its nature the
prescriptions on jurisdiction and venue applicable to ordinary suits may not
apply.  Thus a third-party complaint has
to yield to the jurisdiction and venue of the
main action.  This view is supported by
our decision in Republic vs. Central Surety & Insurance Co., G.R. L-27802,
Oct. 26, 1968, 25 SCRA 641,
where we said:

“3.  Upon the third issue, the Surety takes the
position that if the trial court acquired jurisdiction over the main case, ‘it
follows that it could also take cognizance of the third-party complaint which
derives its life from the complaint.’

“The Surety has a point here. 
It is true that the third-party complaint was filed after the effectivity date of Republic Act 3828.  It is likewise true that the demand therein
made does not exceed P10,000, and, therefore, is not
within the jurisdiction of the Court of First Instance if it were an
independent action.  But the third-party
complaint is an ancillary suit which depends on the jurisdiction of the court
over the main action.  Since the trial
court had acquired jurisdiction over the complaint, it necessarily follows that
it likewise had jurisdiction over the
third-party complaint which is but an incident thereof.  This must be so because jurisdiction over the
main case embraces all incidental matters arising therefrom
and connected therewith.  A contrary rule
would result in ‘split jurisdiction’ which is not favored, and in multiplicity
of suits, a situation obnoxious to the orderly administration of justice.  The court acquired jurisdiction over the
third-party complaint, provided it had jurisdiction over the main case, for the
reason that the third-party complaint is but a continuation thereof, its
purpose being to seek ‘contribution, indemnity, subrogation or any other
relief, in respect to his opponent’s claim.'” (At pp.
648-649.  See also Talisay-Silay Milling Co., Inc., and J. Amado
Araneta vs. The Court of Industrial Relations and
Central Azucarera del Danao,
L-21582., Nov. 29, 1966, 18 SCRA 894.)

WHEREFORE, finding the petition to be well-taken, the same
is hereby granted; the order of the respondent judge dismissing the third-party
complaint is rescinded.  Cost against
respondents.

SO ORDERED.

Barredo, (Chairman), Aquino, Fernandez, and
De Castro, JJ., concur.